Overtime changes will hurt workers

Published 9:25 pm Thursday, March 27, 2014

For all of the talk about the minimum wage, little has been said about another measure President Barack Obama is proposing that will give people a raise with someone else’s money.

“President Obama on March 13 signed an order directing the Labor Department to expand the class of employees entitled to overtime pay,” writes restaurant Andy Puzder in the Wall Street Journal. “Currently, if a salaried employee makes more than $24,000 a year and is part of management — if he manages the business, directs the work of other employees, and has the authority to hire and fire — that employee is exempt from overtime coverage.”

Obama proposes raising that threshold to $50,000 per year. Puzder says that like raising the minimum wage, mandating bigger paychecks for these entry-level managers will limit their opportunities.

The result of this would be to demote “entry-level managers to glorified crew members by replacing their incentive to get results with an incentive to log more hours,” Puzder explains.

“Rewarding time spent rather than time well spent won’t help address this problem,” he says. “Workers who aspire to climb the management ladder strive for the opportunity to move from hourly-wage, crew-level positions to salaried management positions with performance-based incentives. What they lose in overtime pay they gain in the stature and sense of accomplishment that comes from being a salaried manager.”

Young, ambitious people just starting on the management career path will now be limited in how hard they can work to get ahead.

Puzder, who heads the CKE Restaurants (parent company of Hardees and other restaurant chains) says he sees young people starting on the road to rewarding careers.

“I’ve watched young men and women enter the labor force in our restaurants,” he says. “I’ve seen the pride and determination that leads to success in their careers and lives. Some move on to other jobs and challenges equipped with the experience you can only get from a paying job. Others stay, aspiring to move up to managerial positions. There’s nothing more fulfilling than seeing new and unskilled employees work their way up to managing a restaurant.”

But that ladder will be available to fewer young people if employers are forced to pay more.

“Overtime pay has to come from somewhere, most likely from reduced hours, reduced salaries or reduced bonuses,” Puzder explains. “It’s easy to attack businesses when they employ these cost-cutting measures. But, unlike government, businesses must generate profits to grow.”

His contents are backed up by economists with the Heritage Foundation.

“Changing overtime eligibility does not actually raise workers’ pay,” says Heritage’s James Sherk. “Why not? Most employers will compensate by cutting salaries an offsetting amount. Businesses responded exactly this way to overtime eligibility lawsuits. IBM, for example, recently gave several thousand salaried technical workers overtime as part of a legal settlement. The company also cut their base salaries by one seventh. The workers take-home pay remained the same.”

Obama should let workers and employers find the proper balance between themselves, and keep government mandates out of the equation.